Farm bill showdown in Washington

by Jay Sjerven
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WASHINGTON — The Senate on Dec. 14 passed the Farm, Nutrition and Bioenergy Act of 2007 by an overwhelming vote of 79 in favor versus 14 opposed. The Senate and the House of Representatives, which passed its version of the farm bill in July, will establish a conference committee that early in the new year will hammer out differences between the two bills and compose a common final bill that will be submitted to each body for its approval. There were differences between the two bills, but most were relatively minor and likely easy to surmount.

But the Bush administration threatened to veto the House bill when it passed in July and said it would veto the Senate bill if it reached the president’s desk in its current form. The Senate farm bill passed with a veto-proof majority, but the House bill failed to reach the required two-thirds majority, passing by a vote of 231 to 191. A showdown between Congress and the administration loomed as indicated by statements of the president’s press secretary and acting Secretary of Agriculture Charles Conner shortly after the Senate vote.

Senator Tom Harkin of Iowa, chairman of the Senate Committee on Agriculture, Nutrition and Forestry, pointed to the fact the 2007 farm bill garnered more votes in the Senate than any other farm bill since 1973.

"This is a strong bipartisan bill, evident by the fact it passed committee after only one day of deliberation with no negative votes voiced against it and passed the Senate today by an overwhelming majority," Mr. Harkin said.

The $286 billion Senate farm bill would extend farm subsidy programs based on direct payments, marketing loans and counter-cyclical payments determined by target prices. Those target prices would be raised for most program crops, and loan rates would be adjusted, with increases indicated for sugar, wheat, barley, oats and other oilseeds. The loan rates on corn and soybeans would be unchanged from the current program. The Senate bill, like the House legislation, also would provide producers the option beginning with the 2010 crop year to choose to participate in a state-level revenue protection program instead of the traditional farm support program.

The Senate bill by 2010 would ban subsidy payments to farmers whose adjusted gross incomes exceed $750,000 and who earn less than two-thirds of their income from agriculture. The current farm program prohibits payments to those with incomes of more than $2.5 million and who make less than three-fourths of their income from farming. The Senate bill also would ban some farmers from collecting payments for multiple farm businesses.

The Senate bill would increase spending by $5.3 billion for nutrition programs, $4.4 billion for conservation programs and $1 billion for renewable energy programs. It also would establish a $5 billion fund to aid farmers in the event of weather-related disasters.

The increased spending in the Senate bill would be partially paid for by penalizing companies under the "economic substance" doctrine that holds that for a company to claim a tax deduction for a specific transaction, that transaction must yield a profit or have some other clear economic benefit separate from the tax benefit.

Differences with the House to be sorted out in conference include payment limitations. The House bill prohibits payments to farmers whose adjusted gross income exceeds $1 million. The House also would ban subsidies to those whose income exceeds $500,000 if more than one-third of that income is derived from non-farming sources. The House bill would increase spending by $4.2 billion for nutrition programs, $2.8 billion for conservation and $2.4 billion for renewable energy programs. The House legislation includes no disaster relief fund.

The House would pay for its increases in spending by collecting taxes from certain multinational companies with U.S. subsidiaries that hitherto had not been obligated to pay such taxes.

The Bush administration immediately denounced the Senate farm bill for raising taxes to expand programs and for lacking reform.

Acting Secretary of Agriculture Charles Conner said, "This legislation is fundamentally flawed. Unless the House and Senate can come together and craft a measure that contains real reform, we are no closer to a good farm bill than we were before today’s passage."

Mr. Conner acknowledged the administration was disappointed with the size of the vote in favor of the Senate farm bill, but he pointed out that earlier in the week the Lugar-Lautenberg amendment, which proposed a more extensive reform of farm programs than even the administration was prepared to support, received 37 votes in the Senate. Mr. Conner said the amendment’s authors told him there were a number of senators who missed the vote but would have supported the amendment.

Mr. Conner said there was more support in the Senate for tighter limits on farm subsidy payments than indicated by the passed legislation. An amendment offered by Senators Byron Dorgan of North Dakota and Charles Grassley of Iowa would have set an enforceable hard cap of $250,000 for payments received by any one individual on an annual basis, but the measure fell one vote short of attaining a "super majority" (60 votes) required for its incorporation into the Senate bill. Among the amendment’s supporters was Mr. Harkin, a supporter of tighter payment limits, who said the measure’s failure marked a "missed opportunity."

The Bush administration in its farm bill proposals tabled last spring said no farm payments should be made to individuals whose gross adjusted income was more than $200,000, a level that would place those individuals among the top 2% of citizens ranked by income.

Mr. Conner said Congress must "get the fiscal side of this thing right and fair and honest, and secondly, take the wealthiest 2% of Americans off the taxpayer dole." He said with these changes made "you’re on a great path toward getting a farm bill done very quickly." He indicated other changes also would be required to win the president’s approval.

This article can also be found in the digital edition of Food Business News, December 25, 2007, starting on Page 1. Click here to search that archive.

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